A state appeals court on Thursday blocked Governor Christie's efforts to take $160 million out of trust funds that towns use to build low-cost housing units for poor, disabled and elderly residents.

It was the latest setback for Christie in a legal battle brewing for years over New Jersey's troubled housing program for poor residents. Last month, the state Supreme Court ruled that Christie's inaction on affordable-housing matters had gone on too long and required an urgent fix.

As an end run around the Christie administration, the high court put judges in charge of setting rules and giving guidance to towns on how many low-cost housing units they should be building. With Thursday's ruling by the appeals court, the judiciary is now set to take control of millions of dollars in housing funds to implement those plans.

Christie, a Republican, in 2012 tried to take the housing funds to help balance the state budget. The appeals court rejected his position and faulted his administration for ignoring previous court orders, declining to write statewide housing regulations and leaving New Jersey towns in the dark as to how many homes should be built for their lowest-income residents.

Brian Murray, a Christie spokesman, criticized the court's ruling, predicting an "activist judiciary will continue to saddle towns with an irrational, economically burdensome and conflicting set of rules for affordable housing."

Lawyers in the case estimated the housing trust funds to hold nearly $160 million, accumulated from fees that private developers pay to towns. The courts previously blocked off an additional $40 million from Christie in an earlier legal dispute.

Had he won the cases, Christie could have tried to include the $200 million into the coming state budget before the June 30 deadline.

Crunched for cash amid weak economic conditions in the state, the governor is proposing to cut a planned payment into the public workers' pension system – from $3 billion to $1.3 billion – in the budget he has drafted for the next fiscal year.

Every penny counts in Christie's $33.8 billion budget proposal, because the state Supreme Court, in a separate case, could rule soon on whether New Jersey needs to make much higher payments into the state pension system than Christie has planned, a move that could cost billions of dollars.

Murray noted that the housing funds were not included in Christie's latest budget proposal and would not upset his plans. Christie may choose to keep fighting for the housing funds at the state Supreme Court. Murray referred questions on that to the state Attorney General's Office, which declined to comment Thursday.

Praise from lawyers

The Fair Share Housing Center, a non-profit group of housing lawyers that argued against the governor, said the court's action Thursday ensured that thousands of low-cost homes would be built or rehabilitated for low- and moderate-income, disabled and elderly residents.

"Waitresses in New Jersey's diners, people who work in malls, day-care teachers, and people who need supportive housing can all breathe easier because money used to help make homes more affordable won't be taken," said Kevin Walsh, the Fair Share attorney who handled the case.

The $200 million represents "a major down payment" on what is expected to be a new wave of low-cost homes in New Jersey's expensive suburbs, Walsh added.

Christie's attorneys had argued that no regulations were needed on how to spend the housing funds.

"This is not a serious response to the problem at hand," the court wrote, adding that a 2008 state law explicitly mandated that such rules be written.

Christie's attorneys have had little luck over the years in trying to convince the courts that New Jersey needs looser affordable-housing requirements. The governor tried to lower the number of housing units that towns are required to build, and he attempted to disband the Council on Affordable Housing (COAH), the state agency created to manage the housing program. Christie lost both cases.

"In light of the recent action taken by the Supreme Court – and barring a change in the status quo – the courts are the only available forum for addressing these matters," Judge Clarkson Fisher Jr. wrote for the appeals court. "The issues raised in this appeal can no longer be left in COAH's moribund hands."

New urgency

In addition to giving judges control over affordable-housing matters, the Supreme Court's ruling last month also brought new urgency for towns and private developers to build more low-cost housing. The high court allowed lawsuits to proceed against any municipality that fails to provide enough units for low-income residents.

The court rulings all note that the Republican governor and the Democratic-controlled Legislature can take the reins back on affordable housing by passing new legislation. Murray said Thursday's ruling "reinforces the need for the Legislature to end its inaction and move on the governor's call to pass real reform legislation to overhaul COAH," but the two sides stopped negotiating after reaching an impasse in 2011.